Exploring the asymmetric relationship between macroeconomic factors and corporate profitability in the MSCI Colombia index

Abstract

This study aims to explore the asymmetric effects of macroeconomic factors on the profitability of large-cap companies in an emerging country like Colombia, using the Morgan Stanley Capital International (MSCI) Colombia index as the basis. We employ a combination of singular spectrum analysis (SSA) and principal component analysis (PCA) to identify and estimate four key macroeconomic factors that account for approximately 47.8% of Colombia’s macroeconomy. These factors encompass indicators related to inflation and cost of living, foreign trade and exchange rate, employment and labor force and trade and production in Colombia. We utilize the distributed lag nonlinear model (DLNM) to analyze the asymmetric relationships between these factors and corporate profitability, considering different scenarios and lags. Our analysis reveals that there are indeed asymmetric relationships between the identified macroeconomic factors and corporate profitability. These relationships exhibit variability over time and lags, indicating the nuanced nature of their impact on corporate performance. This study contributes to the existing literature by applying a novel methodology that combines SSA and PCA to identify macroeconomic factors within the Colombian context. Additionally, our focus on asymmetric relationships and their dynamic nature in relation to corporate profitability, using DLNM, adds original insights to the research on this subject.

Orlando Joaqui Barandica

PhD Industrial Engineering

My research interests include energy markets, business analytics, quantitative finance, applied econometrics and statistical, and data visualization.